Investing in Hong Kong Property: The Ultimate Guide

Hong Kong property has a high entry point. But the city’s location, stability, and economic vibrancy make it worth looking at for certain types of investors.

Formally a British colony until 1997, the city-state of Hong Kong has served as an important gateway between East and West for more than a hundred years. The island became prosperous from trade, which helped it become prosperous in finance later on.

Low taxes, business-friendly policies, and a strategic location have helped turned the city into one of the world’s richest. Hong Kong is now the de-facto financial center of Asia – and one of the top three worldwide, rivaled only by New York and London.

The Hong Kong property market is perhaps most famous for being the most expensive in the world. At a whopping US$25,000 per square meter (about US$2,400 per square foot), you can hardly buy a 2-bedroom condo for less than US$2 million dollars.

Hong Kong is one of the densest cities in the world. However, quality of life can still be very high depending on where you live.

Land reclamation, infrastructure projects, and smart planning have helped keep prices lower in some areas. Disneyland and Hong Kong’s airport are both built on reclaimed land. Having one of the world’s best public transportation systems has also made things easier.

But high prices don’t mean the Hong Kong property market is a bad investment. Not at all.

Quite simply, people from all over the world want to live and work in Hong Kong. Chinese from the nearby mainland come to Hong Kong for freedom and opportunity. Western expats arrive on plush salaries to climb the corporate ladder.

Combine that with being a small island territory, add a population of over 8 million people, and real estate is bound to naturally be expensive.

As such, Hong Kong property is for certain types of investors. High net worth individuals, in particular. The city won’t grow as fast as Cambodia, for example. But for those with a lot of spare cash, there’s something to be said for buying real estate in a global financial center with limited space.

Can Foreigners Invest in Hong Kong Real Estate?

Technically, there is no freehold land in Hong Kong. All plots (except for this church) are leasehold. But it’s far more complicated than that.

When the British gave control of Hong Kong back to China in 1997 it was done so under the condition that all land would be on a lease for 50 years. Therefore, all land is leased from the Chinese government until the year 2047.

However, few people expect much of anything to happen in 30 years. The general consensus is that all leases will be renewed, probably free of charge, once 2047 arrives. Taking people’s land would ruin everything which made Hong Kong successful and achieve nothing.

The Chinese are a very practical bunch. That’s why they’ve kept Hong Kong as a separate system from the mainland in the first place. Why ruin something which clearly works?

Of course, all of this means that foreigners have the same ownership rights as locals when buying Hong Kong property. Just remember that you’re technically on a long-term lease.

How Much are Property Taxes in Hong Kong?

Hong Kong property taxes are payable when either renting or transferring real estate. All properties in Hong Kong are on a leasehold basis. So there’s no annual property tax if you’re not making any income from it.

A tax of 15% on the property’s rental income is payable if you’re renting it out. There’s also a 20% deduction for repairs and maintenance, but this is just assumed to be 20% of the rental income. As such, the effective tax paid on rental income is around 12%.

You also have to pay Stamp Duty if you’re transferring a property – or I suppose technically the rights to a lease.

These vary widely based on whether you’re a foreigner or permanent resident, whether you own other real estate in Hong Kong, the value of the property, and the amount of time you’ve owned it. Stamp Duty in Hong Kong can be as low as 1.5% of its total value – or as high as 32%.

Places to Invest in Hong Kong

Hong Kong is rather large for a city-state. In fact, it’s almost 4 times larger than Singapore. There’s no such thing as a “cheap area” of Hong Kong. But there are still a wide range of neighborhoods each with their own pros and cons.

Ease of access to mass transit system (MTR) is important when buying Hong Kong property for investment. The city is large and congested, so the ability to get places conveniently is important for most people. Thankfully, Hong Kong has one of the world’s best transportation systems.

For obvious reasons, real estate prices become lower the further you get away from the central business district. Houses located on Victoria Peak, along with apartments in Central, are among the most expensive properties in the world.

Meanwhile, apartments further away on Lantau Island or the far outskirts of Kowloon have more reasonable prices. They’re not cheap, just cheaper.

Wan Chai / Central / Mid Levels

Wan Chai and Central comprise the island’s main commercial center. Nearby Mid Levels is located on the lower part of Victoria Peak with easy access to both districts by escalator. Together, they all represent Hong Kong’s commercial and financial core.

At the end of 2015, an apartment in Mid Levels broke records by selling for $142,000 per square meter – or $13,200 per square foot. The property wasn’t large by billionaire standards at 531 square meters (5720 square feet), but was nonetheless sold for many millions of dollars.

It may still be worth buying real estate in this area if you have tons of spare cash and want to preserve your wealth. There’s a rare kind of preservation that comes along with having billionaires and large banks as your neighbors in Asia’s financial center.

Just remember that you’ll pay heavily for living next to HSBC and Morgan Stanley in Hong Kong.

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North Point

North Point is a more local neighborhood directly east of Wan Chai. The MTR runs through the area, so expats often choose to live here because of simple access to the offices, international restaurants, and malls found closer to downtown.

But few of these amenities are in North Point itself. Instead, there’s a traditional vibe with wet markets, low rise accommodation, and some great Cantonese food. Foreigners living here would probably tell you they prefer the authenticity.

Real estate prices are also noticeably lower than in nearby districts. Some might call North Point “run down” – and that’s probably true when comparing it to the glitz of Central.

With that said, apartment buildings are in good condition and the area is seeing greater interest from expats. North Point’s combination of centrality and value is hard to find elsewhere in Hong Kong.

Jardine’s Lookout / Happy Valley

Two more of Hong Kong’s priciest areas, Jardine’s Lookout and Happy Valley are on Victoria Peak itself. Some of the best views on the island can be found in these neighborhoods where properties have coveted views of the city skyline and Victoria Harbor.

Offering seclusion and convenience, Happy Valley has a variety of different properties. Units in low rise complexes and high-rise apartments are for sale. Jardine’s Lookout is a bit more exclusive, mostly having large homes worth many millions of dollars.

Needless to say, spectacular views combined with easy access to downtown make these two among the best places to live in Hong Kong.

Repulse Bay / Stanley

Located on the southern part of Hong Kong Island, Stanley and Repulse Bay have some of the territory’s nicest beaches. Locals and expats alike live in the area because of good restaurants, international schools, and of course the ocean.

One drawback of these two neighborhoods is not having access to the MTR, nor a convenient way to get downtown. But a line is currently under construction which should increase their desirability even further.

Repulse Bay is known for being more expensive than Stanley. Wealthy Chinese businessmen buy summer homes near their yachts in the former, while the latter has a trendy vibe and is geared more toward westerners.

Views of Repulse Bay. Don’t worry too much about the name.

Kowloon

Across the harbor from Hong Kong Island, Kowloon is grittier and further from the banks and neighborhoods where most expats work. But the peninsula still enjoys great access to Central, in some cases being just a single MTR station away from downtown.

Real estate prices in the southernmost part of Kowloon, closer to Victoria Harbor, can sometimes rival those of properties found in Central or Wan Chai.

However, Kowloon is also a large area. In fact, it’s bigger than Hong Kong Island itself by most definitions. Property values are more reasonable in Kowloon Tong, or New Kowloon further north and bordering the New Territories.

Because of a lower density and several international schools, these parts of Kowloon are preferred by families and those with children. Residents enjoys amenities, shopping, and simple access to the city center through the MTR system.

Real Estate Agents in Hong Kong

Unlike most places in Southeast Asia, where locals prefer to sell property based off referrals from family and friends to avoid paying a commission, real estate agents are commonly used in Hong Kong.

Part of this is because Hong Kong has high quality services in general. But the biggest reason is because of high real estate prices on the island. This means agents can still make a living off of comparatively low commissions.

The standard commission is 2% with half paid by the buyer and the rest by the seller. In addition, the buyer must usually pay a deposit of 5% when signing the Sales and Purchase Agreement. The deposit is kept if the buyer backs out of the contract.

Is Hong Kong Property a Good Investment?

My answer to “is something a good investment?” is always relative to other investments. Don’t get me wrong: property in Hong Kong could very well increase in value over time. Limited space, a strategic location, and being East Asia’s financial capital mean there will always be buyers.

However, many of these same benefits can be gotten elsewhere. Real estate in Singapore is desirable for the same reasons, for example. Prices are also significantly less in Singapore even though it’s one of the world’s most expensive cities too.

Buying Hong Kong property might be a good idea if you have lots of spare cash and want to park some of it in a safe jurisdiction. But investing in frontier markets offers a better combination of risk and return for most people.

Skip the Next Western Recession

Learn the best places to invest – and where to avoid – by downloading our free Investment Cheat Sheet.

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.